Sunday, 17 April 2016

The NHS, TTIP, and the EU referendum

Tamara Hervey,
Jean Monnet Professor of EU Law, The University of Sheffield

Who would
have thought that the NHS would be such a significant aspect of the debate on
the UK’s membership of the EU?

With
campaigns for the referendum on 23 June 2016 underway, all sorts of claims are
being made about the effects of EU membership on the NHS, and people have been
rightly wondering whether they are accurate. Here are some of the questions
that I have been asked (others are covered here):

Q1.What
influence does the EU have on the NHS now
– does the EU make decisions about our NHS?

Q2.What
– if anything – do EU membership; the Transatlantic Trade and Investment
Partnership (TTIP); and the NHS have to do with each other?

Q3.Assuming
the EU agrees to the TTIP, how does EU membership impact, or not, on
‘privatisation’ of the NHS?

Q4.How
– if at all – would it be different if the UK left the EU?

Q5.Would
being in the EU prevent a future government from ‘renationalising’ the NHS?

In
answering these questions, I want to make clear that this is not just an
argument about facts, or a
disagreement about how to interpret
the data.[Note 1]

It is also
a discussion about interpretation of
texts. Those who are not lawyers may find this frustrating, and may be
looking to lawyers to ‘just tell me, what is the legal position’. However, I
will insist that the craft and professional skill of lawyers (in practice and
in the academy) is to provide credible and convincing interpretations of legal
texts, a matter on which there can be
justifiable and mutually respected disagreement. Lawyers do not simply
state ‘what is the law’. So my answers to the questions are – in that sense –
not definitive.

However,
the answers I give in this blog are based not only on my political convictions:
I am convinced that, on balance, to remain in the EU is by far the best outcome
from the June 2016 referendum. My interpretations are also based on over 20
years of researching and teaching EU law, and how it applies in health
contexts. My collaborator Professor
Jean McHale and I were among the first to think about health and EU law. Of
course, I will also freely admit that I think my answers are the best
interpretations of the legal texts.

In summary,
here are my answers. The analysis supporting these conclusions follows below.

A1.The
EU does not tell our government how to run the NHS. Some EU rules affect the
way in which the NHS may be run, but those rules are interpreted in ways which
respect national decisions about how national health systems are organised and
the values they express.

A2.The
EU and its Member States will be bound by TTIP, if it is agreed. To the extent
that the TTIP rules apply to public national health systems across the EU, and
to our NHS in particular, if we remain in the EU, the TTIP rules will apply. However,
TTIP only applies where there is a market element to the provision of services.
That means that it does not apply to some aspects of any of the national health
systems in the EU, including our NHS. Even where it might apply to NHS
services, it is still open to our government, which will likely have a veto
over TTIP as an EU Member State, to negotiate a ‘reservation’ (opt out) from
TTIP or parts of TTIP. And even where no reservation has been negotiated, TTIP
still permits regulation limiting free trade for ‘legitimate policy
objectives’.

A3.Assuming
the EU agrees TTIP, EU membership would not require continued existing
‘privatisation’ or further ‘privatisation’ of the NHS except to the extent that
TTIP applies to national health services in general, and our NHS in particular,
as outlined above.

A4.If
the UK left the EU, it would not be bound by TTIP, but as I’ve already said,
TTIP is not the danger to the NHS that some people claim. Anyway, the UK will seek a free trade deal
with the US if it leaves the EU, raising the TTIP issues again, but outside the
context of the EU’s respect for the ways European countries organise their
national health.

A5.No.
Being in the EU does not prevent a future government from ‘renationalising’ the
NHS.

The
starting point in considering the EU’s influence on the NHS is that the NHS is
a matter of national competence. Article 168 (7) of the Treaty
on the Functioning of the EU clearly states that the organisation and
delivery of health services is a national responsibility, not even a matter of
shared competence between the EU and its Member States. Nothing in EU law requires governments to organise health systems in
any particular way. Choices about the way our NHS works are national – they are the decisions of our government(s)
[Note 2], enacted in law by our
Parliament(s), and interpreted by our
courts and administrative bodies. Other EU countries organise their health
systems in very different ways, and are entitled to do so, although we share
common values about national health systems.

That said,
there are features of EU law that have an impact on aspects of our NHS. The
Single Market – which is regularly cited as one of the main reasons to Remain –
requires free trade in products and services across EU borders, and fair
competition between market actors operating within the EU. EU law is based on
market liberalisation: as its ‘better regulation’
shows. This has been heavily criticised from the political left, for instance,
by those seeking to protect labour rights. But EU law also includes labour
rights: for instance, all employers including hospitals must comply with EU
rules on working hours. Note also that recently-commissioned legal
advice to the Trades Union Congress is that remaining in the EU is a better
way to protect labour rights than leaving.

For a long
time, it was thought that EU rules applied only to private health service providers, so not to national health systems.
But all EU Member States have elements of market provision within their
national health systems – these are part of a broader liberalization agenda
being promoted by the World Bank
since the 1990s. EU law applies to
those market actorsin the NHS.

But it does
so in ways that respect national
decisions. EU law does this through three legal mechanisms:

·In some instances, EU law leaves national health
systems outside the scope of its application. For instance the Services Directive
excludes health services altogether.

·Relevant EU laws that do apply have significant exceptions
for ‘services of general interest’ and health is such a service.

·Restrictions on free movement of products or
services that would otherwise breach free trade law, and cartel-like or
monopolistic behaviour that would otherwise breach competition law, can be justified
under EU law, if they are necessary to protect ‘legitimate public interests’
such as effective organisation of hospital care in a particular region.

In an
analysis of scores of decisions of courts and competition authorities, across
all the EU’s Member States, our Cambridge University Press book European Union Health Law found that
the closer a health institution is to the ‘heart’ of a national health system,
the more readily national preferences are respected through the way that EU
rules are interpreted. Funding arrangements, hospitals, laboratories, blood and
tissue centres all enjoy a protected position in EU law; pharmacies to some
extent; dental clinics and opticians less so.

Like EU
law, the TTIP (along with all other trade agreements) is based on an ideology
of free trade. If such an agreement were to apply the ordinary rules of free
trade to all sectors of the EU, then it would
indeed represent a significant threat to the European ways of organising
health services.

But it
doesn’t.

All the EU Member States have national
health systems based on dignity in terms of how patients are treated;
solidarity in terms of how systems are funded; and equality in terms of access.
So it is not surprising that the EU is negotiating a trade deal that will
respect those values. Each government normally has a veto in EU trade deals: if
we don’t get the deal we want in TTIP, our government could oppose it. [Note 3]
What is intended by the parties to the agreement in TTIP (the EU, its Member
States and the US) is important, because it is taken into account when
interpreting the legal texts. Safeguards for public services are embedded in EU
law, so they were probably assumed in the EU’s negotiating position with the US
over TTIP from the start. We don’t have those early negotiating texts, so we
can’t tell for sure.

But we do have the more recent negotiating
texts – thanks to the response of the EU to significant grassroots pressure
for transparency.[Note 4] The ways in which the latest (March 2016) texts
express support for those European values in health services involve the scope
of the agreement; exceptions; and justifications for departing from its general
rules.

·Exceptions and justifications
include:

·The opening provision in the chapter of TTIP on
services and investment liberalisation, which confirms that the EU, its Member
States and the US may ‘adopt, maintain and enforce’ national measures that
restrict services or investment liberalisation, as ‘necessary
to pursue legitimate policy objectives’. In other words, states may adopt
justifiable regulation. A non-exhaustive list of such regulatory policy
objectives includes protecting public health; securing dignity, solidarity and
equality within the NHS constitute such an objective.

·Similarly, the ‘general exceptions’ clauses
include agreement that nothing in the TTIP should be interpreted in such a way
as to prevent the EU, its Member States, or the USA and its states, from
adopting or enforcing measures ‘necessary to protect human … health’.

·Neither of these provisions is explicitly about
the NHS, but they will be taken into account when interpreting the TTIP should
it apply to future US service providers or investors in the NHS. It is hard to
think of a service of general interest with a stronger claim to legitimate and
justifiable regulation.

·The TTIP will include Annexes in which existing
national laws ‘derogating’ from the liberalisation provisions (permitted
exceptions to those rules), and areas in which individual national governments
reserve the right to make future derogations, are listed. I say more about
these ‘reservations’ below.

·It’s important also to understand that
non-discriminatory rules, such as a requirement to be licensed, quality
standards, obligation to provide a universal service, or language
proficiencies, are all allowed under TTIP – they are justifiable regulation. So
none of these, or similar, aspects of the NHS would be affected.

·The approach being proposed in TTIP to
determining the scope of application of the services and investment provisions
is a variant of ‘negative
lists’, in which the EU and US will (if they can agree) explicitly exclude
certain sectors from the TTIP.

·TTIP will also probably include ‘standstill’ or
‘ratchet’ clauses, to prevent reintroduction of national rules restricting, eg
foreign ownership of firms.

How should
we interpret the TTIP provisions in the context of our NHS? A legal
opinion prepared for Unite, based on the July
2015 negotiating texts, concluded that ‘TTIP proposes a real and serious
risk to future UK government decision-making in the NHS’. (Incidentally,
Unite’s position on the referendum is Remain.)
The advice proposed ‘a blanket exception’ for the NHS in the main text of TTIP,
or a reservation in one of its Annexes, as the solution. The negotiating texts explicitly
reserve the right to make changes at any time prior to the conclusion of the
negotiations, so such an exception or reservation could still be included.

But so far,
the TTIP text does not do so.

Austria,
Germany, Greece and Italy all have explicit reservations in the text
from the services and investment provisions of TTIP for existing rules about some health professions. France has a general
reservation limiting the nature of legal entities through which foreign
investors can provide health services.
But the UK hasn’t entered any reservations in either category in this
part of the TTIP text. (Cyprus seems more worried about US hairdressers than
the UK is about this. It has a reservation for hairdressing services.) In the
context of market access, the UK’s reservation is only to state that ‘establishment
for doctors under the National Health Service is subject to medical manpower
planning’. As should now be clear, these
reservations clauses of TTIP express preferences
of the UK government. They are not a function of the EU’s negotiation of
TTIP per se.

The UK has entered reservations for possible future provisions which restrict
cross-border provision of health services, pharmaceuticals, or medical and
orthopaedical products, where the provider is not legally established or
physically present in the UK. These could be used to restrict access of
US-based firms to these aspects of the UK market in the future.

The EU
itself has entered reservations
for future provisions in the publicly funded or state supported health sector:

“with regard to the provision of all health services which receive
public funding or State support in any form, and are therefore not considered
to be privately funded …. The EU reserves the right to adopt or maintain any
measures with regard to all privately funded health services, other than
privately funded hospital, ambulance, and residential health services other
than hospital services … with respect to requiring the establishment of suppliers
and restricting the cross-border provision of privately funded hospital,
ambulance, and residential health services other than hospital services …”.

The text
here embodies the notion of European national health services, which regardless
of exactly how they are funded, or the form in which state support is given,
are not considered to be part of the ‘private’ sector. Market access under the
TTIP is only for privately funded
health services. This is consistent with the values of EU health law.

The EU’s position
is also expressed in an important general exclusion from the market
access and investment rules of TTIP for ‘activities considered as public
utilities at national or local level’, which may lawfully be public monopolies
and enjoy exclusive rights to supply public services. The text explicitly says
that these include health services. Future sales of nationally-held equity
interests in or nationally owned assets of state enterprises providing health,
social, or education services may prohibit or limit sale to or ownership by US
firms. EU countries may also introduce rules on nationality of management or
board members, or limiting suppliers. Furthermore, although TTIP is all about
greater regulatory coherence between the EU and the US, the TTIP texts explicitly embody the right to regulate to pursue
legitimate public policy objectives. The EU can be expected to exercise
that power consistently with its approach to public national health services.
The European Commission has assured the House of Commons Health Committee that
this is so, in a formal
letter in December 2014.

The
rationale for the Unite legal advice was that the TTIP texts did not provide
sufficient assurances that the UK government would not be required to pay
substantial compensation to US
investors in the national health sector in the event of a decision of a future
UK government to change the way the NHS is organised. The threat of litigation,
or worse, the use of the widely-criticised investor-state dispute settlement
mechanism involving private and secret arbitration, would provide a ‘chilling
effect’ on a future government’s discretion, for example, to take back ‘in
house’ certain services now provided by private contractors.

It is the
case that, under TTIP, governments would be obliged to protect foreign
investments, respect contractual commitments, and not to expropriate property
through nationalisation without fair compensation for ‘market value’ of
investments made. But this is true in existing international trade or
investment agreements, and would apply in any future trade or investment deals
that the UK were to negotiate if it left the EU. There’s a nice summary
explaining this here.

The
obligation to compensate also applies, of course, to compensation for national firms, were a future UK
government to breach contracts with such firms by renationalising the NHS. In
this regard, the EU and TTIP are a red herring.

But if
under a future renationalised NHS, which provided health services through
publicly owned entities, contracts with private providers were simply not
renewed, claims in contract law would not apply. The idea of a potential ‘chilling effect’
comes from the fear that there might be a claim under TTIP for foreign
investors. The argument
has been made that a US investor in a private provider contracting with a
Clinical Commissioning Group (CCG) under the Health and Social Care Act 2012
might claim that their investment in England and Wales was on the basis of a
secure future market for such contracts. Investment decisions made on the basis
that, although each contract was time-bound, there would be many future
opportunities to contract with CCGs, and so to remove all possible future
contracts would deprive the US investor of its property.

That
argument assumes that the new national law would be a breach of TTIP, notwithstanding
the UK’s right to adopt justifiable regulation to achieve legitimate policy
objectives embodied in the TTIP text. As
I have already argued, a better interpretation of the TTIP text is that such
regulation is permitted. The 12
November 2015 negotiating text on Investor Dispute Settlement begins with
the ‘right to adopt justifiable regulation’:

“The provisions of this section shall not affect the right of the
Parties to regulate within their territories through measures necessary to
achieve legitimate policy objectives”

and

“the provisions of this section shall not be interpreted as a
commitment from a Party that it will not change the legal and regulatory
framework, including in a manner that may negatively affect the operation of
covered investments or the investor’s expectations of profits.”

The text
confirms that expropriation of private property may take place ‘for a public
purpose’, and it is undoubtedly the case that a decision of a government to
renationalise the NHS would be for such a purpose.

The ‘right
to adopt justifiable regulation’ clause is general, and in itself doesn’t
provide explicit protection for a
decision of a government to take an action that indirectly results in
expropriation of property. What I am suggesting here is that the proper interpretation of the text of TTIP (especially of the exclusions
from the scope of TTIP, the reservations clauses, and the ‘right to adopt
justifiable regulation’ itself) would
take into account all of the above arguments about the place of health services within EU health law: not as an ‘ordinary’ service, subject to
the rules of free and fair trade, but as a service of general interest, for
which significant exceptions, flexibilities, and exclusions apply. This is what
the EU’s Court of Justice has done (see Hervey
& McHale). It is what the TTIP investment courts should understand as
the intention, and meaning, behind the legal texts.

Moreover,
even if the TTIP court concluded that there had been a breach, it would still
have to decide what is a ‘fair market value’ for compensation for the relevant
investment.

The
original idea in the TTIP’s proposed procedure for settling such disputes was
to use international arbitration. This has been criticised as lacking in the
transparency and respect for the rule of law associated with decisions made by
courts. The EU’s November 2015 negotiating text indicates a different approach.
Disputes about investment settlements would be resolved by an ‘investment court
system’, consisting of a tribunal and an appeal tribunal. The 15 first instance
judges (sitting in panels of three) and 6 appeal judges would be independent of
any government, qualified to hold judicial office in their own countries, and
would have appropriate experience. They would either be paid a retainer fee, or
would be salaried judges. A code of conduct would require disclosure of
judicial interests, independence and impartiality. Judges would not be
permitted to hear claims where they had a conflict of interest, and a specific
procedure to assert such conflict of interest would be available. The
proceedings and documents would be made transparent, subject to redacting
confidential information. All of these rules are designed to secure a system respecting the principles of
judicial process. While it is impossible at this stage to assess the
possible future working of such a system in practice, the legal texts suggest
something more akin to a court than to a private dispute settlement mechanism,
with the concomitant expectation that a properly judicial approach would be
taken to textual interpretation.

So, to
recap, as for whether being in the EU would prevent a future government from
‘renationalising’ the NHS, of course that question is based on the premise that
a future UK population elects a government that seriously proposes renationalisation.
Others are better judges of the likelihood of that, but I note that even the
Blair government continued with the NHS ‘marketisation’ agenda. It should be
apparent from what I have already said that I do not think that EU law prevents
such renationalisation. Indeed, in general EU law does
not prevent nationalisation of business.

I have
written about this in the past, taking the opposite view. It is certainly
possible to argue that EU law ‘locks in’ arrangements for liberalized service
provisions. This is sometimes known as the ‘aquarium to fish soup
argument’ (you can make the latter from the former but not the other way
around). But I now have a different understanding of the ways EU law includes
significant flexibilities and exceptions for ‘services of general interest’. EU
law cannot simply be said to promote competition at the expense of other NHS
values, such as dignity, solidarity and
equality. On the contrary, those values themselves are embedded into the legal texts of EU competition and free market
law, and the ways in which they are interpreted.

Furthermore,
the UK government could agree a TTIP reservation
clause for the NHS. Many other Member States have done so, reflecting the
way they organise their national health systems. For instance, Germany, one of
the countries which has gone some way towards liberalizing its national health
system, has many such clauses already in the negotiating texts. Nothing prevents
the UK government from including such reservations while continuing to be part
of the EU.

My view,
along with that of many
in the health policy community, is that the greatest threat to the NHS
remains the policy
of successive British governments, based on the idea that a market is the
best approach to efficiency, and undermining the historic approach to the NHS as a service based on need and dignity,
with no place for austerity narratives. Staying
in the EU keeps us within that kind of vision for a public national health
service.

Photo credit: NationalHealthExecutive.com

Barnard & Peers: chapter 21, chapter 24

Notes

[Note 1]

Conflicting
data has been presented on, for instance:

·numbers of incoming patients from other EU
countries who are treated within the NHS;

·how much that costs;

·how much is reimbursed to the NHS by other
countries, or by insurance or other private means;

·how much they spend on other services while they
are here;

·how many UK citizens access free health care
when in other EU countries on holiday;

·how many UK citizens live permanently in another
EU Member State, accessing health care there [1]
[2]
[3]
[4]
[5];

·how many non-UK EU doctors, nurses, or other
health professionals work in the UK [6]
[7]
[8];

·how many of those are incorporated in the USA?
(I couldn’t find any report on that, although it would seem that the
contractual clauses seeking to block tax-avoiding incorporation have been abandoned
recently, and the links with shareholding MPs reported here
seem interesting).

Responsibility
for health services is a devolved matter in Scotland;
Wales; and Northern Ireland. This blog refers to
the UK government, because this is the body that negotiates international trade
deals. But decisions about the organisation
of health services, including the extent to which health services are
subject to market liberalisation, differ between the UK’s nations.

[Note 3]

The
European Commission is negotiating TTIP with the USA. But it can only negotiate on the mandate
given by the Council. The Council is the governments of the Member States,
including the UK government. The Council votes unanimously on general trade
agreements like TTIP, since they include non-trade issues as well, so our
government has a veto. The negotiation
is supervised by a special committee appointed by the Council (ie the Member
States), to which the European Commission has to report regularly. The European
Commission also has to report to the European Parliament. The European
Parliament has a veto. See Article 207
TFEU. It is likely that each Member
State will also have to individually ratify the TTIP too (because it is what is
called a ‘mixed agreement’, not entirely within EU competence), giving national
parliaments a de facto veto in most
Member States, including ours. This blog is written on the basis that the TTIP
is a mixed agreement – see further [1] [2]
[3].

[Note 4]

This is
highly unusual for trade deals, which are normally negotiated entirely in
secret. So one possible implication of Brexit is that we may have less access
to negotiating texts of future UK trade deals, unless our government chooses to
adopt a similar approach to transparency.

None of
this analysis would have been possible without access to the negotiating texts.

10 comments:

No claim can be made, counter or for TTIP as there is no agreement in place to discuss either way.

The negotiations have been carried out in complete secrecy and nobody can verify anything as fact.

What we can say is that anything negotiated in secrecy can't possibly be for the benefit of the people it is supposed to represent, and if it were there would be absolute openness and transparency in order to gain popular support.

By your logic, as there is complete openness and transparency in order to gain popular support, this deal must be good for the people.

How did I find the website with all the information on this supposedly secret deal? I googled "EU TTIP". Clearly people would rather click "share" on a Facebook slogan than actually look for information

TTIP also has to go through national parliaments. So the same point applies. Gove said last week he wants a UK/USA free trade deal. Since the UK government has a veto on TTIP, why would that deal be different from TTIP?

Do you want to provide a source for that? In any event, what Juncker wants is irrelevant. The negotiating mandate isn't decided by him, but by national governments, and it's discussed in detail in the blog post. Furthermore, TTIP has to be approved by each country's government and parliament. Would this really get through the UK parliament?

UK population elects a government that seriously proposes renationalisation. Others are better judges of the likelihood of that, but I note that even the Blair government continued with the NHS ‘marketisation’ agenda.